The Case of the Personal Computer Industry - Linking Health with Global Production Networks

The Case of the Personal Computer Industry - Linking Health with Global Production Networks
Working Papers:
                                Globalization and Health Equity Unit

Linking Health with Global Production Networks:
The Case of the Personal Computer Industry

                   Asim Qasim
The Case of the Personal Computer Industry - Linking Health with Global Production Networks
Working Papers:
                                                                        Globalization and Health Equity Unit

               Linking Health with Global Production Networks:
             The Case of the Personal Computer Industry
                                               Asim Qasim
                                            University of Ottawa
                                                  May 2011
The author would like to acknowledge Ronald Labonté, Ted Schrecker, Raphael Lencucha and Katia Mohindra for
        their valuable comments and feedback, and Michelle Payne for her diligent editing of this paper..
                                               Photo Credits
                             World Health Assembly: UN Photos/Eskinder Debebe
          Front Cover inset photos, left to right: UN Photos/John Isaac/Martine Perret/Marie Frechon
                                 Title Page Photo: UN Photos/Evan Schneider
           Abstract inset photos, left to right: UN Photos/Sophia Paris/Martine Perret/Marie Frechon
                                              ISSN 1925-5608
The Case of the Personal Computer Industry - Linking Health with Global Production Networks
Working Papers:
                                                                         Globalization and Health Equity Unit

ACD		        allergic contact dermatitis
APEC         Asia-Pacific Economic Cooperation
AFTA		       ASEAN Free Trade Agreement
ASEAN		      Association for Southeast Asian Nations
BIT		        Bilateral investment treaty
BOI		        Board of Investment
CAFOD		      Catholic Agency for Overseas Development
CEREAL       Center for Reflection and Action on Labour Issues
CM		         contract manufacturer
CPU		        central processing unit
CRT		        cathode ray tube
CSR		        corporate social responsibility
DALY		       disability adjusted life years
EGME		       ethylene glycol monomethyl ether
EIA		        environmental impact assessment
EICC		       Electronic Industry Citizenship Coalition
EPA		        Environmental Protection Agency
EPZ		        export processing zone
EU		         European Union
E-waste      electronic waste
EWSR		       European Waste Shipment Regulation
FAO		        Food and Agricultural Organization
FDI		        foreign direct investment
GeSI		       Global e-Sustainability Initiative
GDP		        gross domestic product
GPN		        global production network
HSIP		       Hsinchu Science based Industrial Park
IBM		        International Business Machines Corporation
ICD		        irritant contact dermatitis
ICT		        information and communication technologies
ILO		        International Labour Organization
ISO		        International Organization for Standardization
LCA		        life cycle assessment
LCD		        liquid crystal display

          Linking Health with Global Productions Networks: The Case of the Personal Computer Industry
The Case of the Personal Computer Industry - Linking Health with Global Production Networks
Working Papers:
                                                                         Globalization and Health Equity Unit

MNC		        multinational company
NAFTA		      North American Free Trade Agreement
NGO		        nongovernmental organization
OBM		        original brand manufacturer
OECD		       Organization of Economic Cooperation and Development
OEM		        original equipment manufacturer
OHSAS		      Occupational Health and Safety Assessment Series
OPT		        outward processing tariff
PBDE		       polybrominated diphenyl ether
PC		         personal computer
PCB		        printed circuit board
PDI		        Plan for the Development of Informatic
PEL		        permissible exposure level
ppm		        parts per million
PPP		        purchasing power parity
R&D		        research and development
REACH		      Regulation, Evaluation, and Authorization of Chemicals
RoHS		       Restriction on Hazardous Substances
SDH		        social determinants of health
TLV		        threshold limit value
TRIPs		      Trade Related Aspects of Intellectual Property Rights
US		         United States
WEEE		       Waste Electrical and Electronic Equipment
WHO		        World Health Organization
WTO		        World Trade Organization

          Linking Health with Global Productions Networks: The Case of the Personal Computer Industry
The Case of the Personal Computer Industry - Linking Health with Global Production Networks
Working Papers:
                                                                                      Globalization and Health Equity Unit

                                                   1 Introduction
On August 12, 1981, the International Business Machines Corporation (IBM) introduced the first person-
al computer (PC) product into the household and small business market (Matthews & Matthews, 2003).
Initially IBM held a vertically-integrated business strategy with all computer parts and components built in-
house. However, to invest more of IBM’s efforts in marketing the PC, the company transitioned to outsourc-
ing the production of its microprocessors to contracted companies in the United States (US). The transition
from vertical integration to horizontal specialization coincided with a global increase in market liberalization
(Dedrick & Kraemer, 2002).
In the following years Taiwan, Singapore, Mexico, and more recently, China began to emerge as key play-
ers in the PC industry, increasing their global economic share of hardware production from 8.2% in 1990 to
23.9% in 2000 (Dedrick & Kraemer, 2002). During the 2000s, the PC sector took two significant hits, with
the burst of the bubble in 2001, and the global economic recession in 2008. Yet, the structure of
the PC industry continued to grow and outsource production outside the US, Japan, and Europe (OECD,
2010). Semiconductors1, commonly used as an indicator for computer hardware production, had increased
sales in 2010 after a 14% drop in 2009 (OECD, 2010). While spending in computer products decreased
early on in the 2008 economic crisis, recent projections expect the annual growth in sales to be 5.3% (pro-
jection by Gartner) and 7.7% (projection by Forrester) after 2010 (OECD, 2010).
In less than two decades the computer industry expanded to become a global production network (GPN).
The computer GPN is now one of the fastest growing and most profitable industries, with annual production
growth rates reaching 16% for microchip fabrication (Williams, 2003b) and annual revenue growth rates ex-
ceeding 200% for semiconductors, as in the case of Taiwan in 1999 (Chang et al., 2001). The market value
for PC shipments was expected to be USD 222.9 billion by the end of 2010 (Gartner, 2009).
The rapid growth of a global PC industry occurred with only a limited consideration or understanding of
its social and health implications. As the demand for computer production expanded in the 1980s, occu-
pational health and environmental concerns began to grow, centring around toxic metals and chemicals,
such as lead, cadmium, and polybrominated diphenyl ether (PBDE), that are commonly used in computer
production. While scientific research on the health impacts of such chemicals has greatly increased over
the past 20 years, the rapid pace of technological turnover, characteristic of the PC industry, has created
1 Semiconductors are commonly used in computer microprocessors. While the semiconductor industry supplies the majority of its
products to PC companies, they are also utilized in cell phone companies. As a result, the semiconductor industry is not exclusive to
PC supply chain activities.

Changing the format to landscape: Assessing the application of information and communication technologies (ICTs) to health-
               care delivery in rural Uganda and its putative association with technical and social innovation
The Case of the Personal Computer Industry - Linking Health with Global Production Networks
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                                                                                Globalization and Health Equity Unit

challenges for researchers concerned with the exposure of workers to new compounds during production.
Furthermore, exposure to toxic chemicals is not exclusive to computer industry workers, but also affects
informal recycling workers [a job that has arisen because of the growth in electronic waste (e-waste)],
and communities within range of the emissions and outputs from PC production sites. The generation of
computer waste is not a domestic problem, but an international one with developed nations exporting large
quantities of e-waste to developing and transitional nations such as China and India.
What remains to be better understood is how PC industries link to health through the globalized production
supply chain and how the outsourcing of PC components manufacturing to the Asia-Pacific2 region relates
to health outcomes there. Relatedly, how has globalization – mainly through economic liberalization - in-
fluenced the global supply chains of PC production and what are the health consequences? The linkages
to health are not just environmental and occupational health concerns, but also the indirect influence on
health (positively and negatively) by both labour market changes and the socio-economic conditions of PC
production workers (Ferus-Comelo, 2006). This paper will investigate how globalization of the computer
industry has acted on: social determinants of health (SDH), especially employment and labour conditions;
environmental health, from industrial production and e-waste; and occupational health.

1.1 Linking health and the personal computer industry: A conceptual framework
The following conceptual framework was created to illustrate the linkages of a globalized PC industry with
health (Fig. 1). In a single PC there are over 1 500 components and parts (Dedrick, Kraemer & Linden, 2009;
Williams, 2000). The activities of a global PC company include design, research and development (R&D),
refining of raw materials, numerous manufacturing and assembly stages, and marketing. Consequently, the
structure of a computer GPN is complex, involving the networking of numerous firms specializing in specific
activities or components. While the framework created is a simplification of the PC industry structure, it
highlights key aspects in a GPN relevant to health outcomes.
The scope of this paper is not to perform a life cycle assessment (LCA) of a personal computer, but to
include economic, political, and social variables that underlie the globalization of the PC industry and its
health linkages. Similarly, a case study approach is not taken, as there is insufficient information on the ac-
tivities of a single PC supply chain. Global supply chains are highly interconnected between PC companies,
with companies often sharing the same suppliers (Dedrick & Kraemer, 2002). Thus, defining the impact of
a single supply chain is also less relevant to evaluating the globalized nature of the PC industry and its
relationship to health. Analyzing a single GPN does not illustrate health linkages relating to the industry as
a whole, such as national policies for high-tech industries and science industrial parks (industrial parks with
a high concentration of high-tech and electronics industries).
The focus of this paper is primarily on GPNs investing and outsourcing to East Asia (mainly to Singapore,
Thailand, Malaysia, Indonesia, the Philippines, Taiwan, and China) and Mexico. While there has been high
growth in production in Eastern Europe, particularly Poland, the Czech Republic, Romania, and Hungary,
this region represents a small share of global PC production. In contrast East Asia has seen a rapid growth
in PC production since the 1980s. In Latin America, Mexico has become a major destination for outsourced
PC industries due to its proximity to the US, one of the world’s largest PC markets and the location of many
PC company headquarters.
Issues relating to consumer activities and marketing are not considered. However, consumer trends will be
indirectly noted through production trends, market access, and falling PC prices. Certain studies reviewed
in this paper analyzed the information and communication technology (ICT) and electronics sectors, which
include a wide range of industries other than PCs, such as cellular phones, white goods (domestic appli-
ances such as refrigerators, laundry machines, etc), televisions, etc. Nevertheless, these studies remain
relevant for an assessment of health issues related to science industrial parks, where electronics and ICT
companies co-exist with PC industries. When information does derive from studies of the ICT or electronics
industry, it will be explicitly referenced as such.

2 Asia-Pacific will refer to East Asia and Mexico

Changing the format to landscape: Assessing the application of information and communication technologies (ICTs) to health-
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This research paper is divided into distinct areas of the framework. It first reviews how economic liberali-
zation has contributed to the global distribution and structure of computer production. Which multinational
and state policies have influenced the distribution and structure of PC industries? How have the structures
of PC industries influenced employment conditions, and what links are there to health? It then identifies
and describes the important environmental and occupational health impacts of computer production. More
specifically, how is PC production linked to occupational and environmental health at various stages of
the supply chain? It next discusses the rise of e-waste: what health issues relate to e-waste and how is it
distributed globally? Finally, it discusses the regulation of PC production and how it can be improved with
respect to reducing health risks. In particular what international and national legislations have been created
to manage PC industry production and e-waste, and what are their limitations?

             Linking Health with Global Productions Networks: The Case of the Personal Computer Industry
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                     2 Globalization of the computer industry
In 1985 the global share of hardware production remained largely within the US, Japan, and Europe, total-
ling 87.1% (with 49.2% for the US and 18.9% for Japan) (Dedrick & Kraemer, 2002). By the 1990s, the glob-
al distribution of PC supply chains changed drastically. A strong consumer demand arose and exceeded the
capacity of existing PC supply chains. The strategic direction of numerous PC companies was foreign direct
investment (FDI) and outsourcing certain activities to contract manufacturers (CMs) based in Asia-Pacific.
This period of PC expansion internationally corresponds with greater liberalization trends throughout the
world (Athukorala, 2005; Dedrick et al., 2001; Ernst, 2005; Gaullier, Lemoine, & Unal-Kesenci, 2007). By
the mid 1990s the majority of PC companies began outsourcing the production of key components to
CMs (Dedrick & Kraemer, 2000; 2002). Emerging economies, such as Mexico, increased their stake in
the industry, but the largest growth in total global share of hardware production occurred in East Asia (in
particular in Singapore, Taiwan, China, Thailand, South Korea, and Malaysia) from 3% in 1985 to 28.9% in
2000 (Dedrick & Kraemer, 2002). Consequently, Japan experienced a sharp drop in the global share of the
hardware industry from 29.2% in 1990 to 16.3% by 2000 (Dedrick & Kraemer, 2002).
This trend continued in the new millennium as the share of ICT3 trade in computer components and periph-
erals declined from 37% in 1996 to 25% in 2008 among the Organization of Economic Cooperation and
Development (OECD) countries (OECD, 2010). Since the mid-1990s, China has grown to become the larg-
est exporter of ICT goods, as a result of FDIs and outsourcing (Dedrick & Kraemer, 2001). From 1999 to
2008, the US trade deficit in agricultural and manufactured goods increased from USD 262.5 billion to USD
400 billion (Baily, 2011). Computers and electronics were the largest contributing factors to the increased
US trade deficit, accounting for 48% of the deficit increase (Baily, 2011). Nevertheless, China’s production
remains closely linked to neighbouring countries such as Singapore, Malaysia, Korea, and Japan (OECD,
World trade grew rapidly following the internet bubble until the recession in 2008 (OECD, 2010). However,
the distribution of trade continued to change. From 2006 to 2008 trade of computer and peripheral equip-
ment by OECD countries declined significantly, falling even more rapidly during the economic crisis. This
decline in trade among OECD countries corresponded with an increase in trade and a shift in production to
non-OECD economies. China, Singapore, Malaysia and Thailand increased their trade in ICT goods. Share
of imports from non-OECD countries to OECD countries increased from 32% to 48% from 1996 to 2008
(OECD, 2010). Growth in ICT manufacturing and related exports within OECD countries is mostly a result of
Mexico, Korea, and eastern European members. From 1996 to 2008 the highest growth in ICT exports (par-
ticularly assembled ICT equipment) was in the Eastern European countries, Hungary (38% compound an-
nual growth rate), the Czech Republic (32%), the Slovak Republic (36%), and Poland (28%) (OECD, 2010).
As PC companies proliferated in number, the increase in competition contributed to a drop in the costs of
components (Dedrick & Kraemer, 2002). This rapid shift in the global supply chain has important links to
health outcomes, both positive and negative. While the expansion and growth of PC industries provided
increased job opportunities for both highly and low skilled labour in Asia-Pacific, poor and often unregulated
working conditions placed the low skilled labour force at greater risk of environmental and occupational
health risks (Leong & Pandita, 2006). While such issues appear to be localized there are important linkages
to the forces of globalization. The national policies of emerging economies, in an environment of increasing
free trade, have significantly influenced the patterns of global PC industries. The following sections discuss
how such macro-scale factors link to more localized issues such as employment, wages, and working

3 In the OECD Information Technology Outlook 2010 report ICT goods consist of: computer and peripheral equipment; consumer
electronic equipment, communications equipment, electronic components; measuring and precision equipment; and miscellaneous.

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2.1 Trade agreements and relations
As early as the 1960s Asia-Pacific states manufactured basic computer components for US PC companies.
These contracts, however, reflected a minority of PC industry production, as the political environment main-
tained protectionist policies and trade restrictions for East Asian nations. The Cold War prompted the US
military to fund the development of advanced computer technologies within the US, and, for security rea-
sons, limited US based companies from outsourcing computer technology for fear of advancing the military
capacities of opposing states (Ó Riain, 2006). The late 1980s marked a significant stage in expanding PC
production overseas. With a high level of competition between PC firms the computer industry received a
strong push to look internationally to reduce costs (Dedrick & Kraemer, 2002).
By the 1980s, the new direction of liberal economic policies in Southeast Asia fostered greater trade, re-
sulting in a significant increase in FDI towards China and countries of the Association for Southeast Asian
Nations (ASEAN) (Felker, 2003). The global economic climate facilitated investments in the region, with
Singapore being one of the first Southeast Asian nations to take advantage of liberalization in FDI flows
(Athukorala, 2005). The loss of confidence of American investors in Mexico after that country’s announce-
ment to default on loans corresponds with a shift in US investments to East Asia. These policies attracted
FDI in high-tech industries in East Asia through reduced costs for manufacturing firms and the elimination
of trade barriers for intermediate goods (Athukorala, 2005; Ernst, 2005; Phelps & Wu, 2009).
Bilateral investment treaties (BITs) provide key measures to protect foreign investments in the host country,
and determine entry conditions for foreign investments (Salacuse & Sullivan, 2005). During the 1990s the
US attempted to create a preferential trade agreement through the Asia-Pacific Economic Cooperation
(APEC) (Schott, 2006), which would have accelerated the investments of PC GPNs in the region. However,
most East Asian countries had no BITs with the US during the 1980s and 1990s (UNCTAD, 2005).
No significant trade agreement arose until the 1990s, after the accession of East Asian states to the World
Trade Organization (WTO), in 1994. Nevertheless, certain trade arrangements played, and continue to
play, an important role in the structure of computer GPNs. First, the joining of ASEAN nations to the WTO
has increased regional competition and the movement of PC assembly and manufacturing firms within the
region, creating more international opportunities for PC GPNs. Parts and components of semiconductor de-
vices accounted for 59% of ASEAN exports in 2003 to 2004 with the ASEAN Free Trade Agreement (AFTA)
playing a significant role in enabling the intra-regional flow of components (Athukorala, 2005). The fastest
growing product category traded within the ASEAN region was parts and components, with its portion of
regional exports rising from 18% in 1993 to 24% in 2004 (Gaullier et al., 2007). A significant share of com-
puter parts and components production comes from major CMs who directly supply major PC companies
(Botelho et al., 1999; Ernst, 2005; Lüthje, 2006). Additionally, the North American Free Trade Agreement
(NAFTA) made Mexico a key location for final assembly processes in the PC industry (Gaullier et al., 2007).
The reduction and elimination of trade barriers among ASEAN states has facilitated the horizontal speciali-
zation of PC supply chain activities with the distribution of firms based on the comparative advantages of
a country. Consequently, the global pattern of trading in the PC industry shifted exporting and production
to the Asia-Pacific region. In terms of worldwide trade, East Asia tripled its trade surplus in computer hard-
ware during the 1990s to greater than USD 60 billion, while the US and European trade deficit in computer
hardware grew to USD 27 billion and USD 37 billion, respectively (Dedrick & Kraemer, 2002). From 1999 to
2008 the US has increased its trade deficit in computer and related equipment from USD 44 billion to USD
107 billion (Baily, 2011). For OECD countries, the trade deficit in ICT goods increased from USD 14 billion in
1996 to USD 193 billion in 2008, mostly due to trade in computer and peripheral equipment (OECD, 2010).
Similar to the regional trade trend in ASEAN, much of the international trade is between firms for compo-
nents and intermediate products within GPNs rather than final products between countries (Thorbecke
& Yoshitomi, 2006). The outward processing tariff (OPT)4 implemented by the US eliminated tariffs on
4 The outward processing tariff was designed to increase the competitiveness of US firms against imported goods produced at lower
cost and with lower real wages outside the US. The outsourcing of labour intensive activities was first initiated by US electronic
companies (Athukorala, 2005).

                Linking Health with Global Productions Networks: The Case of the Personal Computer Industry
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intermediate goods exported by the US, and only imposed a tariff for the value added internationally
(Athukorala, 2005). The OPT promoted the creation of specialized companies focusing on key components
across the region (Athukorala, 2005).
Another significant trend arose in the new millennium with the accession of China into the WTO in 2001,
which increased investor confidence. However, China started its movement to more liberalized policies in
the 1990s, with significantly reduced tariffs for imported PCs, dropping from 82% to 35% between 1992
and 1993 (Dedrick & Kraemer, 2001). Due to lower costs and China’s proximity to large and emerging mar-
kets, the industry began relocating the manufacturing and assembly of computer parts from ASEAN states
and Mexico to China (Gaullier et al., 2007). Around 75% of the goods exported to China from ASEAN are
considered high- or medium-tech goods (Thorbecke & Yoshitomi, 2006). China is the largest recipient of
components and parts from Japan, ASEAN, and Korea (Felker, 2003; Thorbecke & Yoshitomi, 2006). While
final assembly processes are still strongly concentrated in Mexico, the shift of activity to China has come
at the cost of decreasing ASEAN’s share in the manufacturing of parts and components, creating strong
competition within the region. Along with the strong competition in manufacturing, ASEAN states have fo-
cused efforts in more profitable areas such as design, R&D, and the creation of regional headquarters for
PC industries (Felker, 2003).
While the links to health may seem distant, the location of PC supply chain firms influences the distribu-
tion of more localized occupational and environmental health issues. In addition, the strong competition
between supply firms has ramifications for working conditions and wages. The Trade Related Aspects of
Intellectual Property Rights (TRIPs) of the WTO has played a pivotal role in the international expansion of
GPNs with important links to health. In the PC industry, secrecy of intellectual property is a strong priority
and the basis of a firm’s competitive advantage. However, the protection of intellectual property information
hinders the transparency of firm activity, limiting the understanding of the chemicals utilized, which could,
negatively harm staff and the environment. Academic research faces a temporal mismatch by being limited
to data from PC supply chains that is over three to five years old (Liu, Lin, & Lewis, 2010). The relevance of
research is further reduced as the rapid pace of PC technological advancement can result in new chemicals
being utilized during manufacturing after two to four years (Chang et al., 2001). Consequently, any effec-
tive regulations regarding health concerns during production consistently require change at the same rate
as technological advancements within the PC industry. Recognizing key trade agreements only partially
explains the distribution of PC industries and its relationship to health outcomes. National policies of Asia-
Pacific states have played a significant part in promoting investments and trade in high-tech industries.

2.2 National policies in high-tech sectors
Within the context of international agreements, how have national policies contributed to the distribution of
PC companies globally? Proponents of liberalization (Yamazawa, 1990; 1995; Petri, 1993) have shown how
trade liberalization has promoted job creation and technology transfer to developing and transitional states
in Latin America and Asia-Pacific (as cited in Felker, 2003). In contrast, others argue that the regulation of
liberalization and protectionist measures by states, such as Korea, Taiwan, and China, played a greater
role in developing their technological capacity (Dedrick & Kraemer, 2001; Saxenian, 2005). Ultimately, both
have been important to the distribution of PC industries: while liberalization is unlikely to be a cause of the
global redistribution of PC production, it did create more opportunities for FDI and hence for global supply
chains (Dedrick et al., 2001).
Beginning in the 1970s, East Asian states promoted FDI through the creation of export processing zones
(EPZs), as used in Singapore, China, and Malaysia; and joint ventures with local and foreign based com-
panies, as commonly utilized by Taiwan and South Korea (Felker, 2003). By the 1980s, Southeast Asian
states began to liberalize their FDI policy, lower taxes to electronics industries, offer tax holidays to new
foreign companies, and reduce restrictions on foreign ownership (Dedrick & Kraemer, 2001; Felker, 2003).
Singapore reinvested in infrastructure to encourage design and R&D, while the Port of Singapore Authority
increased customs efficiency to facilitate supply chain movement of intermediate products (Felker, 2003).
Following Singapore’s path, Malaysia streamlined the foreign investment approval process, and created tax

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incentives for design and R&D. Similar approaches were taken by Thailand, the Philippines, and in the late
1990s by China (Felker, 2003). Consequently, FDI in computer manufacturing increased significantly in the
late 1990s (Dedrick & Kraemer, 2002).
With the influx of foreign companies, East Asian nations initiated a new policy direction in the 1990s to help
develop local companies, diversify component production, and promote skill development. In Thailand, the
Board of Investment (BOI) created a program in 1992 to form linkages between multinational companies
(MNCs) and local companies (Felker, 2003). In addition, the BOI created incentives for projects affiliated
with the National Science and Technology Development Agency to help develop Thailand’s R&D capabili-
ties. In 1993, Malaysia initiated the Vendor Development Program where local and multinational companies
provide assistance to local vendors. In 1999, the Global Supplier Program was created to help transcend
local subcontractors of MNCs to be part of the international supply market (Felker, 2003). By the mid 1990s,
China began to prioritize development in the PC industry, with the formation of the Ninth Five-Year National
Development Plan (Dedrick & Kraemer, 2001). This created greater opportunities for FDI, and joint ventures
to developing domestic PC production.
The significance of government policy approaches to liberalization is also exemplified by the adoption of
such policies in Latin America. Since the 1980s, Mexico and Brazil have been hubs for local and foreign
computer industries, although Brazil generally had more local PC and ICT firms (Dedrick et al., 2001). While
Mexico created a sudden transition to tariff reductions and restrictions, Brazil managed a more gradual
To preserve domestic manufacturing and R&D in the computer and ICT sector, Brazil created various incen-
tives for companies that ensured some level of local content, R&D, and production (Dedrick et al., 2001).
The policy measures of Law 9284/91 have been successful in certain areas, such as increasing local R&D,
with 67% of firms increasing R&D spending by at least 50% between 1994 and 1996 (Botelho et al., 1999).
Brazil’s ICT industry invested 4.8% of total sales in R&D in 1997, similar to other successful computer in-
dustry nations such as Korea (3.7%) and Taiwan (4.6%) (Botelho et al., 1999).
In general, the government of Mexico placed a heavy emphasis on a “laissez-faire” approach (Dedrick
et al., 2001). While Mexico attempted a similar approach to Brazil’s, with its Plan for the Development of
Informatic (PDI) in 1994, the initiative was unsuccessful due to limited funds to pay for new projects and
limited coordination among institutions involved in the PDI (Dedrick et al., 2001). The PDI is one of the few
attempts by the Mexican government to promote the development of local industries. With a quick transition
to free markets, Mexico experienced a rapid development in export industries, and a sudden rise in contract
manufacturing (Dedrick et al., 2001). As a result, the PC industry landscape in Mexico remains heavily
dominated by US companies (Dedrick et al., 2001).
While the efforts taken by the Brazilian government were successful in certain areas, the domestic com-
puter industry still faced challenges to compete in a global market. Many domestic hardware and compo-
nent firms were replaced by major foreign PC companies, such as IBM and Hewlett Packard (Botelho et al.,
1999). Nonetheless, some domestic firms were able to transition to other ICT sectors, in particular banking
automation (Dedrick et al., 2001).
In the case of East Asia, Felker (2003) questions the success of local ownership policies (except for
Singapore) in their ability to enhance local companies’ production and revenue through strong links to large
foreign companies. Nevertheless, FDI had increased substantially in East Asia. Within less than two years,
FDI in Southeast Asia increased from USD 938 million in 1999 to USD 6 billion in 2000 (Dedrick & Kraemer,
2002). The use of CMs by PC companies has grown substantially, increasing by more than fourfold during
the 1990s (Dedrick & Kraemer, 2002). Despite failures to implement policies to increase local business
capacity, the strong growth in FDI indicates important pull factors to Asia-Pacific. A survey conducted by
McMillan, Pandolfi, and Salinger (1999) sampled 39 companies involved in PC production, primarily in
manufacturing of electronics components, computer storage devices, semiconductors, peripheral equip-
ment, and computers. The following factors were noted to be most important in location decisions: political
stability, 17%; infrastructure, 18%; cost and availability of skilled labour, 17%; location relative to suppliers

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and customers, 16%; and tax incentives, 10% (McMillan et al., 1999). A recent survey of electronics firms
by Dedrick, Kraemer, and Dunkle (2010) also noted firms prioritizing increased revenue, and cost and
availability of labour for outsourcing new product development. These factors are common to East Asia
contributing to the growth in PC FDI in the region. Similarly, proximity to customers has played a significant
role in the PC industry outsourcing activities to Mexico.
These efforts clearly demonstrate how Asia-Pacific countries proactively regulated economic activities to
create more local ownership in the 1990s. Greater local ownership can contribute to health by increasing
the socio-economic well-being of the population and indirectly through more taxable revenue for govern-
ment offered health services. However, to attract FDI in high-tech industries East Asia has lowered taxes to
electronics industries, eliminated tariffs to encourage trade, and provided tax holidays (Ernst, 2005; Felker,
2003). In 2004, Chinese electronic manufacturing activities were taxed at 3.2% compared to 15.3 to 26.7%
for other sectors (Manhart, 2007). Thus the PC industry contributes relatively little in tax revenue towards
government programs that could promote health, such as equitable access to public health services. In the
case of China, insufficient local taxation has resulted in hospitals and health centres implementing for-profit
(cost-recovery) models. Consequently, the rural poor in China (many of whom migrate to urban areas to
find work, and thus constitute the labour force of PC firms) are pushed into extensive out-of-pocket expen-
ditures, creating deeper poverty and inequity in access to health services (Liu, Rao & Hsiao, 2003). The
expansion of science industrial parks has the potential of improving public health services as a spillover
effect from economic growth. However, Phelps and Wu (2009) note that science industrial parks have lim-
ited influence on enhancing the public sector of host countries. As to how such health care policies link to
economic policies of the PC industry requires further research.

2.2.1 Exploring the pollution haven hypothesis
The pollution haven hypothesis outlines concerns about the impact of liberalization on exporting dirty tech-
nologies or avoiding environmental regulations (Bommer, 1999). Williams (2000) notes that improvements
in environmental performances in developed nations could be due to a shift in manufacturing to developing
countries. However, there is little data to confirm the hypothesis (Williams, 2000). Based on a literature
review, Letchumanan & Kodama (2000) concluded that liberalization, in terms of FDI, did not result in pollu-
tion havens, and in some cases reduced it. However, the study is limited in a few ways. First, the correlation
between FDI and pollution content in developing countries takes a sector wide approach, while the pollution
haven hypothesis is more relevant to individual firm decision making. Second, the assessment does not
consider the impact of supply chains and subsidiaries of foreign companies.
Third, liberalization can indirectly contribute to pollution levels. Domestic firms of developing nations which
are unable to compete with cheap imported goods may resort to environmentally unsafe methods of pro-
duction. Additionally, the contribution of liberalization to poverty promotes informal economies such as
metal smelting and informal recycling of e-waste which can be detrimental to health (Sepúlveda et al., 2010;
Shinkuma & Huong, 2009).

2.3 Structure of GPNs
The combination of macro-scale factors has shaped the structure of PC GPNs with consequential links to
health. Certain companies such as IBM, Compaq, Toshiba, and Apple maintained some in-house produc-
tion of PCs. However, companies are following the example of Dell which has outsourced manufacturing
and design to CMs (Dedrick & Kraemer, 2002). CMs based in emerging economies now account for a large
share of production activities (Ernst, 2005; Lüthje, 2006). In 2007, numerous microchip manufacturing
plants were being built in China and other parts of Asia, but not in the US (Baily, 2011). Similarly, Taiwan
has emerged as the leading supplier for notebook PCs.
Segments of the PC industry supply chain are relocated to minimize costs and access key markets. The
relevance of accessing markets is a growing priority for PC companies. In China the purchase of 5 million
new PCs is expected to occur every year after 2003 (Hicks, Dietmar, & Eugster, 2005). In the early 1990s,
60% of PCS sold in China came from foreign PC companies, but by the late 1990s over 80% came from

             Linking Health with Global Productions Networks: The Case of the Personal Computer Industry
Working Papers:
                                                                             Globalization and Health Equity Unit

domestic firms (Greeven, 2006). Intel, Hewlett Packard, and the Inter-American Development Bank have
each committed USD 1 to 3 billion in programs to develop consumer markets in developing countries
(Cherry & Gottesfeld, 2009).
The movement of companies globally has resulted in important trends in the structure of PC GPNs. First,
since the early 1990s PC production has grown annually, while PC firms have experienced reduced rev-
enues. In 2009, worldwide PC shipments were expected to grow 2.8%, but the market value of PCs was
expected to decline 10.7% (Gartner, 2009). The drop in market value can be attributed to the decline in PC
average selling prices (Gartner, 2009). The average price of a PC dropped from USD 2 000 in the early
1990s to USD 1 000 in 2000 (Dedrick & Kraemer, 2002). Up to 2009 the average selling price in the US
continued to drop to USD 580 (Worthen, 2010).
The high competition among PC firms and the customer demand for cheaper products has increased pres-
sure on lower tier firms in the supply chain to reduce costs. Samel (2010) notes how supplier firms that take
a high volume, low product diversity model of production are vulnerable to volatile market demands. This
structure creates problems in labour standards based around working hours and work shifts. Six of seven
manufacturing firms assessed by Samel (2010) for printer and PC component parts in Malaysia, Singapore,
and Thailand were noted to have the high volume, low diversity model of production. With limited legislation
and enforcement of labour rights in Asia-Pacific countries, employment conditions are strongly dictated by
economic forces, with wages determined by domestic market conditions. Consequently, working conditions
remain poor with increased pressure to maintain lower labour costs.
Furthermore, the demand for reduced costs from PC firms has also increased competition between lower
tier firms within the East Asia region. The recent arrival of China in high-tech manufacturing has resulted in
a large shift in PC production from Southeast Asia to China (Gaullier et al., 2007). The strong competition of
manufacturing firms in East Asia has resulted in suppressing wages and may create incentives for factory
managers to violate employment contracts in order to provide competitive prices. Although more research
is needed to better understand factory managers’ decision making in CMs, the downward pressure of price
competition is leading to more unhealthy conditions of work in the PC industry.
The result of the drop in prices has been significant with firms throughout the supply chain having reduced
profit margins (Worthen, 2010; Yang, 2006). However, following the all time low in 2009, prices for PCs have
been on the upswing with the average selling price in the US increasing to USD 615 in November 2010
(Worthen, 2010). Major PC companies are now focusing on selling higher end products and gaining higher
profit margins. This recent shift in prices suggests that the push for reduced pricing has reached its limit for
manufacturers (Worthen, 2010). Yet, at the present stage it is difficult to determine if this upswing in prices
will be sustained, and whether increased profit margins will trickle down to improved working conditions.
Second, to attract FDI in the 1980s, East Asian countries created science industrial parks with the required
infrastructure for manufacturing operations including reliable water supplies, electrical power, waste man-
agement, and worker housing complexes (Phelps & Wu, 2009). The result has been the clustering of com-
peting PC GPNs in localized areas, attracted to the similar appeal of reduced costs and market access. The
Pearl River Delta region of China is a key region, where many industrial parks are situated. In particular,
Dongguan and Suzhou, China, are common sites for PC related firms, with computer production account-
ing for up to half of the gross production value of Dongguan’s industries (Walcott, 2003). These industrial
parks play a key role in the link between globalization and health outcomes of the population, with the ca-
pacity of some parks exceeding 100 000 workers.
The Hsinchu Science based Industrial Park (HSIP) in Taiwan has become a global centre for notebook PC
supply chain operations. In 1989, Singapore opened a science park for foreign research units linked with
the national university, and offered specialized equipment for prototype manufacturing. Following suit, the
Philippines, Malaysia, Indonesia, and Thailand opened their own science industrial parks, some specializ-
ing in PC industry activities, such as wafer fabrication (Felker, 2003). The industrial areas in Mexico known
as maquiladoras emerged for high-tech industries following the signing of the NAFTA, with many high-tech
firms based in Guadalajara (Astill & Griffith, 2004).

              Linking Health with Global Productions Networks: The Case of the Personal Computer Industry
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                                                                             Globalization and Health Equity Unit

The third trend of PC GPNs is the rapid turnover in technology, with estimates of depreciation in PC prod-
ucts reaching 1% per week (Dedrick & Kraemer, 2002). The rapid pace of technology turnover has involved
the use of new chemicals during production, limiting the time for environmental and health impacts to be
fully researched. Health and safety staff and production engineers in HSIP indicated that new production
procedures may have been implemented without understanding potential toxic risks (Chang et al., 2001).
Fourth, the fragmentation of PC supply chains, with greater outsourcing, has resulted in each segment hav-
ing only partial knowledge of chemical uses, resulting in a knowledge divide as to possible environmental
and health risks. Last, intellectual property protection limits knowledge sharing on environmental and safety
concerns between competing firms and within a supply chain (Chang et al., 2001).
Important questions arise as to how major PC companies in the US, Europe, and Japan are linked to
early stages of resource extraction and primary commodity industries (these include materials such as
copper, lead, silicon, and plastics). These activities are common to less industrialized developing nations
and can have large impacts on environmental and occupational health. Presently, China dominates the
extraction of rare earth metals, which are commonly used in a wide variety of products (Bradsher, 2009).
Nongovernmental organizations (NGOs) have reported worker rights abuse and environmental impacts
in coal mining in China, and in extractive activities of coltan (commonly used for cellular phones) in the
Democratic Republic of the Congo (Bradsher, 2009; Montague, 2002). As these basic materials are involved
in numerous industries, it is difficult to illustrate a clear link specifically to the PC industry. Furthermore,
there is limited information on the practices of extractive firms and their linkages to health. More will be
discussed on this issue in section three.

2.3.1 How has liberalization contributed to the distribution of PC wealth?
The Asia-Pacific PC industry has expanded rapidly due to reduced costs, tax incentives, and access to new
emerging markets in the region (Dedrick & Kraemer, 2002; Felker, 2003; Ernst, 2005). With GPNs maintain-
ing a concentration in East Asia, the region has developed into a hub for a wide range of PC supply chain
activities ranging from basic assembly to R&D. However, has the global expansion of the PC sector altered
the balance of wealth between countries, in particular, developed and emerging economies? The question
is especially relevant to macro-scale health issues, such as the national capacity for health services and
poverty reduction, where high-tech industries account for 7% of the gross domestic product (GDP) in China,
and probably more in other East Asian states (Manhart & Grießhammer, 2006).
The answer depends on what economic variable is assessed. When considering the geographic location
of final assembly, the answer is yes. The US share of final hard drive assembly was almost zero in 1998
(Gourevitch, Bohn, & McKendrick, 2000). In computer hardware production, China exceeded the US to be
the world’s largest producer in 2004 (Yang, 2006). In the case of portable notebooks, Taiwan is a dominant
force, taking 70% of the global market share by volume in 2004 (Yang, 2006). However, by nationality of the
parent firm (or flagship firm), the US dominates with 85% of global production, and 15% for Japan in 1998
(Gourevitch et al., 2000). Much of the wealth generated returns to the US, Japan, and the EU. Evaluating
the Apple iPod and an HP notebook, Dedrick et al. (2009) found the lowest profit margins for firms based
in Taiwan and Korea.
While a few original brand manufacturers (OBMs), such as Acer, have emerged from East Asia, almost
95% of manufacturers are original equipment manufacturers (OEMs), whose products have less value
than OBM products (Yang, 2006). Around 90% of electronics exports in China are through OEMs and CMs
(Leong & Pandita, 2006). The continued dominance of the US PC industry is maintained despite major
PC companies outsourcing all, or most, manufacturing and design processes. Large computer companies
generally focus on R&D, sales, distribution and customer relations, where a significant amount of value is
added (price of final product value versus sum of intermediate inputs) (Dedrick et al., 2009). This global
pattern, often described as Wintelism, is where flagship PC companies maintain greater control by setting
the technology standards for the industry (Felker, 2003). Furthermore, major PC companies avoid respon-
sibility for lower-tier supply chain processes and focus on building a larger market share. This control is not
exclusive to OBMs, but to CMs existing in second and third tiers of the supply chain, such as memory and

              Linking Health with Global Productions Networks: The Case of the Personal Computer Industry
Working Papers:
                                                                            Globalization and Health Equity Unit

processor design and manufacturing firms. Many of the outsourced activities in R&D and manufacturing in
Southeast Asia are owned by US and Japanese companies. Intel, for example, has experienced one of the
highest profit growth rates in the PC industry, partially by maintaining strong control over microchip stand-
ards since the 1980s (Dedrick, et al., 2009).
Emerging PC economies in Asia-Pacific have benefited from employment opportunities. However, to ab-
sorb the value of PC industries, domestic companies need to be able to receive technological knowledge
from competitive foreign companies. The argument for technology transfer has been proposed by liberal
theorists, but the evidence has been mixed. Irwin and Klenow (1994) suggest that in the semiconductor
industry spillovers in learning are substantial (as cited in Saggi, 2002). The case of Taiwan has commonly
been used as an example of successful technology transfer. The circular migration of Taiwanese engineers
to Silicon Valley and back to Taiwan has facilitated the knowledge transfer needed for Taiwanese firms to
remain competitive in a global market (Saxenian, 2005). However, the spillover effect of technology to do-
mestic companies remains a problem. In many cases intellectual property remains a top concern for firms
and can limit the technological transfer to local companies (Chang et al., 2001; Dedrick et al., 2010).
Some researchers suggest that the current pattern of PC industries creates a greater dependency for de-
veloping countries on PC companies in the US, Japan, and Europe. The large growth in CMs and OEMs is
highly dependent on contracts from large PC companies in developed countries. Lardy (1995) and Huang
(2001) noted that East Asia’s dependence on FDI for exports prevented the growth of the domestic private
sector, with limited linkages of MNCs to local firms and low levels of exports by domestic companies (as
cited in Greeven, 2006). Alternatively, the relationship is likely to be co-dependent, with developed states
depending on CMs in Asia-Pacific, Eastern Europe, and Latin America. Presently, there is insufficient re-
search to evaluate dependency theories within PC GPNs. Nonetheless, Asia-Pacific countries offering low
taxes to firms and gaining low profit margins will provide limited resources for public health care services.
Whether employment opportunities and higher wages gained from the PC industry can offset the need for
free health services will be investigated in the following section.

2.4 Links to labour conditions and health
To generalize the overall impacts of globalization on social welfare remains a challenge. Presently, there
are research gaps as to how the computer industry impacts poverty and population health. The incentives
for high-tech industries and the flow of capital to urban areas have likely contributed to greater rural-urban
inequality in income and employment in Asia-Pacific, especially China. However, how the PC industry itself
has contributed to intra-state inequality has not been extensively researched. Dedrick and Kraemer (2002)
argue that, while there has been a gain in employment in foreign based firms and a loss in domestic in-
dustry employment, there has still been an overall gain in employment due to the PC industry. Additionally,
wages in the PC sector appear to be higher and include better benefits than other electronics industries,
especially for highly skilled workers (Gourevitch et al., 2000; Schipper & Haan, 2007).
These trends are generally based on a quantitative analysis of employment wage statistics. In contrast,
testimonial reports by NGOs and researchers have noted how wage conditions, especially for low skilled
labour, do not appear to be improving in the PC sector. While minimum wages have increased in China,
they are not reflective of the costs of living (Leong & Pandita, 2006). Whether minimum wages are enforced
is another issue. A survey of 14 foreign invested electronics firms in Guangdong Province, found eight of
these firms paid workers below the minimum wage (Leong & Pandita, 2006). These are likely to contribute
to SDH via poor socio-economic conditions including poor diet and inappropriate housing. While the ability
to generalize findings from interviews with workers remains difficult, the work of NGOs provides insight into
existing problems in the industry.
Problematic to increasing wages to improve labour conditions, has been the high competition within the
PC industry. Computer prices have been consistently falling since 1990, and the push for cheaper products
moves down the supply chain. Intense price competition between PC component and parts manufacturers
has dropped supplier profit margins to 1 to 5% in Taiwan, with similar margins in other countries (Dedrick
et al., 2009; Yang, 2006). This suggests that liberalization has created opportunities to take advantage of

             Linking Health with Global Productions Networks: The Case of the Personal Computer Industry
Working Papers:
                                                                                       Globalization and Health Equity Unit

lower costs and tax incentives, rather than improving labour wages in sectors of comparative advantage.
The following sections will discuss how labour issues in the PC industry in Asia-Pacific relate to health out-
comes of especially low skilled workers. Issues relating to occupational health and safety will be discussed
in more depth in section three.
Labour wages in the PC industry:
The importance of labour wages in determining the location of PC industries has been questioned, as
labour costs represent a minor fraction of the total costs of production (2.5%) (Dedrick & Kraemer, 2002).
However, labour costs remain a relevant and important issue. First, the value of low wage labour will de-
pend on specific activities of the PC industry, especially assembly operations which require more manual
labour. Last, as the average PC price dropped by more than 50% from the early 1990s to 2000, the profit
margins of PC companies dropped as well; thus, making labour costs (greater than 5% of total costs) more
substantial and more elastic to changes in the PC market relative to fixed costs such as technological
capital. As a result certain aspects of PC production which are labour intensive are outsourced to areas in
which labour is cheaper.
Work activities involved in PC production are complex, involving R&D; fabrication of various parts; manu-
facturing of microchips and semiconductors; and assembly. While the range of activities in the PC sector
is vast, the literature notes that the distribution of wages5 tends to fall into three categories. Within the hard
drive industry the lowest wages are found in China (USD 0.68/hour), and Malaysia (USD 1.88/hour), and
are concentrated in the assembly of hard drives, amounting to over 100 000 staff. In Singapore, wages are
close to USD 5.85/hour, with the majority of work directed to final assembly of disk drives (Gourevitch et al.,
2000). The last group consists of Japan, Western Europe, and the US. In these countries, wages are the
highest at USD 17 to 22/hour (Gourevitch et al., 2000).
With the movement of more complex fabrication and design processes to East Asia, a demand for highly
skilled labour has grown. Emerging PC component industries in Brazil, Mexico, Taiwan, Malaysia, and
Korea have actively invested in tertiary education in technology and engineering to increase the local labour
supply of highly skilled workers (Dedrick et al., 2001). With liberalization of previously closed markets, de-
veloped countries have taken advantage of highly skilled labour, which is now available at a relatively lower
cost. Costs of highly skilled labour in East Asia are 10 to 20% that of the US. In 2002, the annual cost of a
chip designer in Silicon Valley was USD 300 000 per year in contrast to USD 60 000 in Taiwan and USD
24 000 in Suzhou, China6 (Ernst, 2005). The availability of skilled workers, particularly with lower wages,
has been a pull factor in shifting some design and R&D activities to East Asia (Dedrick et al., 2010) and has
indirectly increased the employment opportunities for low skilled labour.
Employment in the PC industry:
Qualitative assessments from NGOs provide some insight on the impact of the PC sector on the health of
low skilled workers (CEREAL, 2007; Ferus-Comelo, 2006; Leong & Pandita, 2006; Lüthje, 2002; Manhart &
Grießhammer, 2006; Schipper & Haan, 2007). In most cases the name brand PC companies do not employ
low skilled workers directly. Rather workers are employed through local hiring agencies, CMs owned by lo-
cal firms, or by subsidiary firms owned by second tier supply chain companies based in Japan and the US.
It is in these manufacturing plants where the population health risks are greatest.
While research has been undertaken on the impact of globalization on PC labour wages, there remains lim-
ited information on its potential impact on social welfare and health. While job opportunities have increased
in developing countries, the global share of wages in the hard drive industry remains mostly in the US (40%
of global wages) and Japan (30% of global wages) (Gourevitch et al., 2000), which can be attributed to the
higher wages paid to smaller workforces in these countries. Asia-Pacific has the highest quantity of labour
staff with around 40% of global employment in the hard drive industry, but less than 15% of global wages
(Gourevitch et al., 2000). The trend of labour positions moving to Asia-Pacific has continued in the new
millennium, with employment in PC production in the US declining by more than 50% from 2000 to 2007
5 Wages are converted in terms of purchasing power parity (PPP) based on 1997 rates.
6 The annual costs of a chip designer are not converted in terms of PPP, but highlight costs to US chip designing firms.

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